Observations focused on the problems of an underdeveloped country, Venezuela, with some serendipity about the world (orchids, techs, science, investments, politics) at large. A famous Venezuelan, Juan Pablo Perez Alfonzo, referred to oil as the devil's excrement. For countries, easy wealth appears indeed to be the sure path to failure. Venezuela might be a clear example of that.

Archive for May, 2003

I will be travelling for the next three weeks and have no idea whether I will be able to connect or even have much to say about what is going on here. If anything happens I will try to post comments and my brother may do it also. See you June 1st., hope things are quiet (my last three trips have been anything but quiet)!!

To recover from the damage produced by the Bolivarian revolution will take a few generations. We have not only regressed on all aspects of life. It is not only a matter of paralysis or being behind materially or intellectually. It is, above all, an emotional fissure that has produced the political use of resentment, the continuous attack to the fundamental emotions of society. No previous Government had spent so much time using such bad faith for the destruction of social capital.

All societies need shared values, rules and regulations that allow the interaction among individuals without too many frictions in order to subsist, work together and develop as a social group. It is what Friedrich von Hayek denominated “the extended order of human cooperation”, the set of informal values shared by people that allows them to collaborate together. If anything has been clarified by the studies of economic development is that the formation of social capital is the decisive factor for the progress and well-being of nations. And we understand as social capital “that total provision of cooperative relations based on the norms of honesty, reciprocity” and the mutual trust needed to function in an efficient manner and assume common challenges. That intangible of development can be built in a very short time, but it takes generations to be formed or reconstructed.

The trust (so stranged from hate and resentment), the reciprocity and the norms for cooperation are fundamental for rational economic behavior. They are indispensable to reduce transaction costs, negotiations costs, and the control of contracts and, as a consequence, to achieve more productivity without adding costs. Even though social order and the rules of cooperation can be created hierarchically, most of them appear in spontaneous and decentralized fashion as part of social interactions and are part of the internalized culture of individuals. When people have to continue living together in the same geographical space, when difficulties ask for cooperation and collaboration to achieve a minimum of well being, both collective and individual, the worst crime that a ruler can commit is the destruction of social capital.

Salam Pax is back in his blog if you want to get a look at what it felt to be under the bombs and not over them. I also think his absence proves he was no fake. He provides a description of the whole time he was gone through an e-mail that he sent to Diane.

PDVSA took its road show two days ago to Houston where the “new” plan to expand production to five million barrels per day was presented to oil industry investors. Thus, the full circle is completed. Ali Rodriguez and Hugo Chavez are now doing exactly what they criticized the Caldera Government when Luis Guisti was President of PDVSA, and which they sold to the people as part of their “revolution” : They want to almost double production, violate OPEC’s quotas and have the additional production come from foreign investment. Amazing, isn’t it? Four years ago Chavez used to say this was not patriotic and was a sell out of the country!

Despite the fact that it was the Government who originally called for negotiations with the opposition and the fact that no agreement has been signed by the Government, here is the position of the Chavez administration:

“The negotiation table has played out its role and now it is the National Assembly’s turn.”

What can I say? How cynical can you be? The Assembly? You’ve got to be kidding me…..

Now, you will pardon me if I am somewhat dubious about the Chavez revolution and its stupid attempts to make things look different from what they are. Here we are, faced with a murder during an opposition march in which everyone in the Government says it is not a political murder, but a “personal” fight between the assassin and the union worker murdered, which has been described by various Government officials as a “loan shark”, a “union leader disputing his position” or “a fight over missing funds”. So it is not political, but curiously these are now the main characters in this non-political event, all of whom are “coincidentally” joined by an extremely political past:

–The Assassin: Manuel Arias alias “El Pollo” well-known Chávez supporter leader of a Bolivarian circle, who pleaded innocent today, saying he was at the pro-Chavez rally when the murder took place and not at the opposition rally. This despite the fact that he was taped at the anti-Chávez demonstration waiting for it to arrive.

–The Judge: Judge Maikel Moreno, the same one that ordered the detention of the two major opposition leaders in February (both now in exile)and who was appointed to his position because of his support for Chavez and despite the fact that he was once convicted for homicide and was jailed later for another homicide but was never convicted. (Can this happen anywhere else in the world?)

The Prosecutor: Chavista prosecutor Danilo Anderson who despite being an environmental prosecutor has been used by the Attorney General’ office to prosecute the major anti-Chavez cases including the murders of April 11, 2002.That day in 2002, 19 people were killed and despite this all those accused that were pro-Chávez walk free today, despite being filmed shooting at the people in the march, while some cops who were not part of the initial shooting but belong to the anti-Chavez Metropolitan police sit now in jail.

The Lawyer: Carlos Duran, famous lawyer for infamous Chavez supporter Lina Ron, whose motto is “there is no change without violence” and who has used violence, political influence and once freed her common-law husband from jail with her influence over the pro-Chavez mayor that had detained him, but still roams the streets of Caracas with impunity despite all of her illegal and violent acts and numerous detention orders. (She violated parole regulations last week, but nothing happened)

These are all supposed to be “non-political” people joined by those strange coincidences probably due to some sort of planetary or cosmological alignment that can only occur in the Chavez revolution. How can I question any of it? I must just be a skeptic, no? Political? Nooooooooo way….I must simply exaggerate.

In his Sunday radio and TV address, President Chavez defined quite well his “new economy” when he said: ” The state does not pretend to monopolize foreign currency, but to compete with the private sector”. Now the rules are simple, the Government controls prices, does not give foreign currency to importers of anything, but it imports, at preferential rates, anything it wants and sells it at whatever price it wants. In fact, Chavez said that the Government is importing 1,300 Tons of chicken from Brazil. Now, the price of chicken is currently controlled at a level that producers lose money when they grow chickens, so it is cheaper to import them, but only if you can do it at the controlled rate and only the Government gets that. Chavez also said that the exchange control office has approved US$ 78 million to importers. It may be true, but the banking system has yet to hand out a single dollar to importers. Exchange controls were imposed over 100 days ago, so in any case $78 million is very little in a country that imported last year more than US$ 16 billion in goods.

The Venezuelan Central Bank made a very important discovery in its report on April’s inflation: Price controls don’t work! According to the Bank, despite price controls a number of items which are regulated increased in price or disappeared from the shelves.

Maybe they can publish it and win the Nobel prize in Economics, together with all of the economic authorities in Venezuela during the last forty years who imposed price controls and saw the same result. Politicians are indeed stupid, no?